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Nov 26, 2013
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Hugo Boss delays 2015 profit target on China slowdown

By
Reuters
Published
Nov 26, 2013

FRANKFURT, Germany - German fashion house Hugo Boss said it would not meet its target of 750 million euros ($1 billion) in core operating profit in 2015 due to slower than expected growth in China and Europe.

The company maintained a target to reach sales of 3 billion euros in 2015 but said it would no longer be able to reach a 25 percent EBITDA margin - earnings before interest, tax, depreciation and amortisation as a percentage of sales.

Hugo Boss AW 13/14 | Source: PixelFormula

"We are clearly committed to a 25 pct EBITDA margin target but this will happen after 2015, and not in 2015," chief executive Claus-Dietrich Lahrs told investors at an event in Hong Kong.

Many analysts had been sceptical of the 2015 targets, forecasting on average sales of 2.9 billion euros and core profit of 713 million for that year, according to ThomsonReuters Starmine, which weights analysts' predictions according to their previous accuracy.

Shares in Hugo Boss were marked down 6.1 percent in early Frankfurt trades ahead of the wider market open at 0800 GMT.

Lahrs said global GDP growth rates had turned out weaker than expected compared with when the group first set its 2015 targets at the end of 2011.

"A particular concern is China," he told investors, echoing recent comments from executives at luxury companies like Burberry and LVMH.

"Compared to what we were used to, the long period of low-hanging fruit, China came down to a rather disappointing growth rate for the luxury industry in 2013," he said, pointing to estimates for 4 percent growth.

Lahrs added that China would not see a return to the high growth rates seen in the past.

To compensate for weak markets and take control of the way its clothes are sold, Hugo Boss has been moving from selling its products through wholesale partners such as department stores to setting up its own shops.

It now expects more than 60 percent of its sales will come from its own retail stores in 2015, compared with a previous forecast for 55 percent, it said on Tuesday.

For 2013, the company expects currency-adjusted sales and earnings to rise by between 6 percent and 8 percent, which would require growth of above 10 percent in the fourth quarter.

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